Common E-commerce Contracts You Need to Manage

From individual drop shippers to large multinational corporations like Amazon, e-commerce is a rapidly growing industry that is changing the way people shop for goods and services. Because of the complex nature of the business, e-commerce businesses have to manage many different e-commerce contracts.

Ecommerce (electronic commerce) is the buying and selling of goods or services via the internet. While e-commerce usually refers to the online sale of physical goods, it can include any kind of commercial transaction that occurs using the internet.

Several types of e-commerce models facilitate transactions between consumers and businesses, like:

1. Business to Consumer (B2C): A business sells a product or service to a consumer.
2. Business to Business (B2B): A business sells a good or service to another business.
3. Consumer to Consumer (C2C): A consumer sells a product or service to another consumer.
4. Consumer to Business (C2B): A consumer sells their products or services to a business.

Ecommerce businesses can take on many different forms. The two major ways they vary are the relationship between the business and consumers and the type of good or service on offer. Some examples of e-commerce businesses include:

• Retail: Selling products directly to customers.
• Wholesale: Selling products in bulk to retail sellers.
• Dropshipping: Selling products to consumers that are manufactured and shipped by a third party.
• Crowdfunding: Collecting money from consumers to raise the necessary capital to bring a product to market.
• Subscription: Recurring purchases of a product or service regularly.

With the rapid growth of online shopping, some of the world’s largest companies are e-commerce companies. Amazon, eBay, and Shopify are all e-commerce businesses.

As internet-based businesses, e-commerce businesses face many potential legal issues related to their web presence. It might be something relating to their website, or an agreement with a service provider. In addition, because they sell goods and services through the internet, these businesses must also address payment and delivery terms or warranties. 

Because of the various activities performed by e-commerce businesses, your business must use the appropriate e-commerce contracts. These agreements provide your company with protections and limit liabilities, which is especially important for businesses with high volumes. Read on to learn about the most common types of eCommerce contracts that require contract management. 

Terms of service

Terms of service agreements are the most common contract that you’ll need to manage. They cover a wide variety of issues related to the relationship between your company and its users. The terms of service govern user conduct on the website. They also outline what users might expect when they use the site, including the services your business will be providing and any user permissions or limitations.

You should ensure that your company’s terms of service address the specific issues associated with your e-commerce website. Some important provisions to cover in these contracts include:

• Intellectual property (IP) ownership
• Acceptable uses of the site
• Prohibited uses of the site
• User submissions
• Disclaimers/liability limitations
• Limited warranties
• Links to privacy policies
• Choice of law and venue
• Representations and warranties of user

When creating terms of service, you should also make sure to avoid the following three common pitfalls:

1. Copying another site’s provisions, as they may be inappropriate or irrelevant for your e-commerce business.
2. Your company not abiding by its own rules and responsibilities, especially concerning user privacy or the sale of email addresses to third parties.
3. Using outdated provisions that fail to account for new website features or changes in the law.

Privacy policy

A privacy policy is a document that states how your e-commerce business will gather, use, and manage customers’ data. It needs to explain which personal information is collected, how it’s used, and how it’s protected.

Every website that collects personal information from visitors is required by privacy regulations like the European Union’s General Data Protection Regulation (GDPR) to have a privacy policy. These contracts may provide some liability protection in the event of a dispute over the way your business handles personal information. Privacy policies are a helpful tool for promoting trust and transparency between your business and its customers. 

User agreements

A user agreement is any contract between a website user and the site’s owner or operator. These e-commerce contracts can be end-user license agreements (EULAs), terms of service/terms and conditions, or privacy policies. They outline the rights and obligations of both parties. User agreements provide the conditions under which a user may use your website. This limits your company’s legal obligations and explains the circumstances required for termination.

Return policy

Customers will inevitably return purchased products, so your e-commerce business needs a return policy. There is no legal obligation for e-commerce companies to accept returns, which means a return policy is discretional. Nevertheless, it’s a good idea to offer returns. It means you can account for defective products and build trust between buyers and sellers.

Because it isn’t a legal document like a privacy policy or terms of service, a return policy can be relatively simple. It should address the following issues:

• Length of return policy
• Condition of returned items
• Eligibility of returns
• Which party pays for shipping

Subscription agreement

If your e-commerce business is subscription-based, you will also need to create and manage a subscription agreement that addresses the purchasing and delivery of goods. While these provisions can be incorporated into the terms of service, it’s best to keep them in a separate e-commerce contract. 

A subscription agreement should cover the specific issues that can occur with your company’s sale of its products or services. Some provisions to consider covering include:

• Website membership agreements
• Electronic signatures
• Consumer protection law compliance
• Information licensing
• Disclaimers/waivers
• Shipping policies
• Export controls
• Product warranties
• Sales tax

Non-disclosure agreement (NDA)

Many e-commerce businesses use independent contractors. If you do, you should have NDAs in place. A non-disclosure agreement is a contract that prohibits the sharing of confidential information. It prevents proprietary information about your business from being leaked to the public.

Vendor agreement

Vendor agreements are the contracts made between your e-commerce business and your suppliers. These contracts are the foundation of your business. They facilitate the sale and purchase of your company’s goods or services.

Some common elements of a vendor contract include:

• Description of goods and services
• Agreed prices or method of pricing 
• Terms of delivery
• Term of payment
• Indemnity clause
• Termination clause
• Ownership clause
• Confidentiality clause

Service-level agreement (SLA)

Your e-commerce business will need a web host and software service providers. For that, you’ll need to negotiate and manage service-level agreements.

A service-level agreement will:

• Define the level and quality of the service to be rendered
• Define how service level and quality will be measured
• Detail remedies and penalties for subpar service

Master service agreement (MSA)

A master service agreement is a contract between two parties that lists the terms that will govern future agreements and transactions. 

In the case of e-commerce, your business would need an MSA if you would like to have a long-term business relationship with web hosts or software service providers. The SLAs that you sign with these companies can be included in an MSA. This can streamline the negotiation process, while still allowing for modifications should there be a change in circumstances.

Warranty

A warranty can help you attract customers. Warranties help make shoppers feel comfortable and confident about purchasing your products.

Warranties address four issues that are important to consumers:

1. Product Protection: Most customers have certain expectations about the products they purchase and the issues the seller will cover. By offering a warranty, your e-commerce business can set expectations and deliver on promises to consumers.
2. Product Quality: For expensive purchases, customers expect a high level of product quality. A warranty demonstrates that your company is willing to stand behind its products and will make consumers feel confident about your brand.
3. Customer Service: A poor customer service experience can lead to lost customers and a negative view of your brand. Extended warranties, especially in conjunction with a product protection company partnership, should be able to provide consumers with excellent support that will positively impact your brand.
4. Flexibility: Inflexible return policies can prevent customers from making purchases or lead to unhappy customers if they purchase a product that does not meet their needs. By offering warranties that allow easy cancellation or transferability, your e-commerce business provides consumers with valuable flexibility.

Using clickwrap agreements to present your e-commerce contracts can be the difference between repeat customers and cart abandoners.

Clickwrap agreements are agreements that users agree to by clicking a box or checking a button that says, “I agree.” Most e-commerce and online businesses use clickwrap agreements to present their Terms of Service or other e-commerce contracts to users. Comprehensive clickwrap solutions ensure that the agreements are presented conspicuously to users (so that they know they are agreeing to a contract) and collect back-end records to prove which user agreed to which contract, and when.

The design of clickwrap agreements is especially important to e-commerce businesses that want to ensure their user terms are enforceable and successfully mitigate risk.

Ecommerce businesses are growing rapidly, especially in the age of digital- and remote-first transactions. Companies like Amazon and Wayfair do high volumes of business, and have e-commerce contracts in place to help mitigate the risk of such a high transaction volume. Contracts like Terms of Service, Vendor Agreements, MSAs, and others are common in the e-commerce industry, and tend to have clauses that cater to the specifically online nature of their business.

Using clickwrap agreements to present e-commerce contracts is a common practice for innovative businesses. A robust clickwrap solution follows best practices for screen design and recordkeeping, ensuring that the contracts do their job of protecting the business.

To learn more about how to manage your e-commerce contracting, request a demo of the only contract management solution that has clickwrap, too!